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Real estate investors throughout the United States are constantly looking for properties to fix and resell. Banks cant or wont lend the money for these investors to buy the properties. Thats where Secured Investment Corp comes in.
- STEP 1 – Investor finds property that can be profitable and makes an offer.
- STEP 2 – Investor submits offer and loan application.
- STEP 3 – Loan is quoted, property is researched and underwriting begins.
- STEP 4 – Loan is closed, property is funded.
- STEP 5 – Loan is sold as a whole note or funded by Secured Investment Corp’s equity funds.
How Are My Private
I very rarely partner with anyone. I almost always set up my loans as a pure interest rate deal. The private-money lender gives me money, and I pay them interest and points. Points are like an origination fee and are based on a percentage of the loan. If I pay 2 points on a $100k loan, I pay $2,000. My lenders charge from 1 to 2 points on the loans. Hard-money lenders charge from 1 to 5 points on loans.
Some investors will share the equity with the lenders, or as I like to call it partners if it is an equity share. They will do all the work, find the deal, and sell the property, while the lender will put up all of the money. Often, the two partners will split the profit 50/50. I hate giving up equity, and I also hate paying people based on the profit I make. There can be a lot of doubt and suspicion about the actual profits, the actual costs, and how the money is being handled on those deals. When I borrow money based on the interest rate, there is no confusion, and it gives me a sense of urgency to get things done so it doesnt cost me as much money!
I also have some deals set up with family where I borrow money all year round, not on a per-deal basis. These loans also have Deeds of Trusts on rental properties I own. The lender has collateral and a way to get their money back if things go south. Their investment is secured by a real asset.
New Years Resolutions For Real Estate Investors
A new year is the perfect time to reflect on the past year and celebrate your achievements, identify areas with room for improvement, learn from the setbacks and move forward. Its also the perfect time to set new goals and come up with attainable resolutions both personally and professionally. For real estate investors looking to Read more
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Understanding Real Estate Financing
Real estate financing describes several financial methods used by potential investors for securing their independent capital investment. Therefore, it encompasses long-term financial methods used to secure capital while buying and renovating property from outside sources. This process of borrowing and lending money is a liability for both parties for those who lend the loan, as well as for those who get the loan as a means of financial support.
How Hard Money Loans Work
Hard money loans, sometimes referred to as bridge loans, are short-term lending instruments that real estate investors can use to finance an investment project. This type of loan is often a tool for house flippers or real estate developers whose goal is to renovate or develop a property, then sell it for a profit. Hard money loans are issued by private lenders rather than mainstream financial institutions such as banks.
Unlike traditional bank loans, the ability to obtain hard money financing isnt determined by the borrower’s . Instead, hard money lenders use the value of the property itself in determining whether to make the loan. Specifically, lenders focus on the after repair value, or ARV, which is an estimate of what the property will be worth once the renovation or development phase is complete.
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Putting It All Together
While the sections thus far lay out the main issues to consider in making an investment in a private real estate offering, no investment will check all of the boxes. In some ways, this is by design. There is a market for these types of investments, and the price that an investor can charge for their capital is often inversely related to the demand for the investment in the marketplace. For example, a very experienced sponsor investing in an in-demand sector will often demand sponsor friendly fees, carried interest, and terms, and may limit the degree to which investors are able to exert control after committing to invest. Alternately, a new manager may provide a better set of terms and investor rights and lots of direct access but may not have the same type of track record or may operate in a less well-known sector.
Because of this balance, having the full picture of an investment opportunity and a complete evaluation prior to a decision to invest is important. One tool that can be useful to investors is a scorecard document that allows the evaluation of each element of an opportunity in isolation, and then the chance to view and think about the investment as a whole rather than focusing on its component parts.
Importance Of Real Estate Financing And Why You Should Consider It
Real estate financing is growing at a minimum of 30% CAGR. At this rate, the business is doubling and the profit is increasing every 2.5 years.
RERA and Aadhaar are bound to main-stream the business of real estate in India. This will further bring more organized real estate players into the market, thus allowing higher and safer businesses for home finance companies.
Greater the development of a country, lesser are the interest rates . The present time is therefore the best time to invest in real estate with loan offers of great profitability.
The net NPA levels are lesser in home finance companies as compared to the banking sector.
Due to the need and push for affordable housing the housing finance domain anticipates the highest growth potential followed by services, technology, and trading. It also guarantees fixed income, as investors are bound to get three times more of the sum than their 20-years loan from home finance.
Commercial realty has also emerged as a resilient segment and substantial traction is witnessed towards the Grade A office space. Positive investment growth is also anticipated in the leasing of coworking spaces.
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My Experience With Private Lending
I am a real estate investor first and foremost. But I have also been both a Borrower and a Lender. My overall experience includes buying/selling mortgages , fix and flips, owning rental properties, and today my real estate business runs an affordable housing program with 80+ properties.
I have personally partnered with private lenders on 100s of real estate deals. The vast majority of our current portfolio was acquired using private money loans. This funding model works really well for me, my private lenders, and the tenants/buyers who live in our homes.
I dont claim to be an expert on private lending, but I do have some mileage and battle scars that hopefully you can benefit from.
So now were not strangers anymore, lets take a look at what youll find in this guide
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The Underlying Investment Itself
Warren Buffett has a great saying: When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact. The same is true in the real estate industry, and therefore often the first and most important question to be asked about a new opportunity, is what exactly the investment is and why it is worthwhile to make it. The real estate industry is one of the most diverse asset classes available to investors, and it is full of niche strategies and businesses that fit a specific purpose, and offer a certain return. One of the exciting things about real estate is that you can find investments as conservative as low leverage loans on urban trophy assets which have a profile similar to investments in high-credit bonds, all the way to highly speculative development projects that can have returns more like a VC fund or small cap equity investment. And everything in between.
While going through each opportunity available in the marketplace is far too broad a topic to be covered here, its worth keeping in mind that this enormous variety exists. And it is useful to think about how to frame a set of questions that can surface the what of a potential investment. Where does it fit in the spectrum of opportunities?
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Real Estate Market Is Unpredictable
Similar to the stock market, the real estate market isnt easy to predict. Many real estate investors make a deadly assumption and believe if the market is hot today, it must be hot tomorrow. But thats simply not true.
While real estate prices do tend to rise over time, the market could change drastically . Supply and demand, interest rates, and changing demographics all play a role in which way the market will swing. And, though you could buy property in a hot market today, nothing guarantees it will remain hot in the future.
Uncover The True Strategy
The reason the return on cost is so useful is that it gives you a baseline for asking questions. If the planned ROC for properties to be acquired in a fund is 7.0%, but the fund manager is promising a 12.0% return to investors, then obviously there is a disconnect. And the question that may be asked is what that difference isis the plan to finance the properties at a lower rate? Is it to sell the properties at a premium? Is it that the manager expects the market rents to grow over time? A combination of those things? something else?
The answer to that question will usually tell you what the real strategy of the manager is, and what the inherent risk they are asking you to take is. Knowing the strategy, in turn, will help you make a more informed decision about the investmentfor example, if the disconnect is future growth in rents, do you believe that thesis? If its a sale of the property at a premium in a few years, is there evidence that it can be sold at the proposed price? And so forth.
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Private Money Lending In Summary
Becoming a private money lender is not for everyone. It can be a good optionIf you have idle money or want to grow your portfolio while investing passively in real estate, but it must be done properly. Make sure you stay informed on real estate investing strategies, the market, and lending practices and that your risk tolerance aligns with this form of investing.
Hard Money Vs Conventional Loans
Lucas Machado, president of House Heroes, a group of real estate investors that flips houses in Florida and finances hard money loans, says hard money loans are easy in another way: The lack of bureaucratic red tape. Unlike conventional banks, lenders arent bound by guidelines regarding the shape of the real estate. Properties in poor condition dont satisfy guidelines for traditional mortgage financing. Hard money lenders, on the other hand, expect to lend on houses in disrepair, Machado says.
Rather, hard money lenders decide whether to make the loan by evaluating the strength of the deal and the reliability of the home flipper, Machado says. If the purchase and repair cost vs. the resale value makes sense and the home flipper is trustworthy, a hard money lender will make the loan.
In evaluating the flipper, hard money lenders aren’t usually worried by borrower qualifications such as debt-to-income ratios and . In some cases, they may want to see an applicant’s documents such as tax returns, bank statements, and credit reports. Nor do they care if down payment funds are borrowed . After all, Should the flipper default, the hard money lender can foreclose, take ownership of the house, and sell it profitably on their own, Machado notes.
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With Us As Your Private Lender You Get Competitive Pricing And Flexible Underwriting
Not only are we a privately-owned company, but we also lend our funds. Whats the difference? Some private money lenders broker their business, and others rely on credit lines that come with strings attached. In contrast, we make our own underwriting rules. These rules are based on our past lending experience and our own risk appetite. In other words, as a private money lender, we march to our own drummer. Our capitalization rates translate into underwriting flexibility and pricing that directly benefit our borrowers.
Hard Money Loans For Seattle Tacoma Spokane And All Of Washington
Intrust Funding is a leading private money lender for real estate investors in Washington state. Known for our hard money loans in Seattle, Tacoma, Spokane, and beyond, real estate investors trust our lending principles and processes for securing maximum value in real estate financing. As a nontraditional lender, with flexibility banks cannot have, we help investors build their real estate portfolios through quick financing and good deals. With Intrust Funding, you can secure fast real estate financing within 48 hours of loan approval. Weve developed and hold to our real estate loan underwriting principles and processes, because we know they work, and they ensure our clients are getting the highest returns on their investments. Your success means our success.
We understand the fast-paced environment of local real estate investing, which makes us the best private money lenders of the Puget Sound Region. Our fix and flip loans for residential property and hard money for commercial investments provide fast capital, allowing borrowers to cover closing costs quickly. With our short term real estate loans, borrowers present all-cash offers in as little as 48 hours to secure the best properties fast.
From Seattle to Spokane, our hard money loans are revolutionizing the real estate lending industry throughout Washington. Intrust Funding maintains an unwavering commitment to efficiency, transparency, and integrity throughout the loan process.
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How Much Do Private Lenders Charge
Private lenders charge different interest amounts ranging from four to 12 percent. The amount they charge will be dependent on several factors, including your investment history, the numbers of the deal at hand, the proposed term length, and more. However, the good news is that oftentimes the interest rates will be negotiable. Remember as you practice your pitch that not only are you trying to secure financing, but also the best loan terms possible.
How To Get A Loan To Flip A House
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Kirsten Rohrs Schmitt is an accomplished professional editor, writer, proofreader, and fact-checker. She has expertise in finance, investing, real estate, and world history. Throughout her career, she has written and edited content for numerous consumer magazines and websites, crafted resumes and social media content for business owners, and created collateral for academia and nonprofits. Kirsten is also the founder and director of Your Best Edit find her on LinkedIn and Facebook.
House flipping is a real estate venture that entails purchasing inexpensive homes that often need work, fixing them up, and then selling them for more than you paid. House flipping can be a lucrative business, but it comes with significant financial risk, especially for beginners.
In 2020, home flipping profit margins and sales declined, according to data from March 2021, but given the COVID-19 pandemic, experts say these figures don’t come as a surprise to industry experts.
If you are interested in purchasing properties to fix and flip and don’t have the cash, you will need a bank loan to help get you started on your real estate endeavor. As of the second quarter of 2021, interest rates on mortgages are historically low, but you will need strong credit to be approved.
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Rent Out Commercial Property
Commercial property is a little different than residential property. Instead of renting out places for people to live, youre renting out space where people will work. Commercial property includes malls, shopping centers, industrial complexes, grocery stores, and offices.
Similar to residential renting, commercial property requires a large upfront investmentjust more. Youll typically need more than a few million to even sit at the table of commercial investors.
Real Estate Loans To Fund Your Vision
Understanding what real estate investors like you want before the rest of the pack. Weve been at the forefront of Direct Real Estate investing lending since 2014.
Quick fact: Weve been doing landlord rental loans before others even started their business.
July 2016, CISION PR Newswire
Loans from $2-10M for value-add projects
Loans for 5-200 rental properties at a time
“So it isnt like you just deal with one person and then youre left in the dark. That is one good thing I liked about working with LendingOne. Everyone was very helpful through the whole process”
Naveen S, New Jersey Investor
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What Is Hard Money Lending
Hard money lending is another alternative to traditional lending sources and allows borrowers to use the investment as collateral on the loan. While many lending sources rely on a borrowers credit history, hard money lending relies on the asset in question. Hard money lending will typically require higher interest fees than traditional loans but can provide borrowers with increased access to capital and a more lenient approval process. Investors with low credit and high equity in a property will often turn to hard money for funding. Additionally, property owners at risk of foreclosure may also utilize hard money loans.